Dismissal of ASB receiver by SEC upheld by CA

The Court of Appeals has upheld the ruling of the Securities and Exchange Commission, dismissing Fortunato Cruz as rehabilitation receiver for the debt-strapped ASB Group of Companies.

The Fifth Division of the Court of Appeals denied Cruz’s petition for certiorari to nullify the SEC order calling for his removal "for placing his personal interest over his fiduciary duties."

The appellate court also dissolved the writ of injunction issued on Sept. 4, 2003, which enjoined SEC from removing Cruz.

In affirming the dismissal of Cruz, the Court of Appeals ruled that "a receiver is a position of trust and confidence, once the same is lost, he may be replaced. " It declared that SEC can motu propio terminate this fiduciary relationship once the interest of the companies and the creditors are no longer protected and prejudiced by the actions of the receiver.

In October 2002, Cruz sought an additional fee of P15 million for facilitating the release of tax credit certificates from the Bureau of Internal Revenue worth P150 million for ASB. But the SEC denied his claim, saying that Cruz’s work in the release of TCCs is part of his duties as receiver and does not merit P15-million fee which is 10 percent of the TCCs.

Cruz’s insistence that he is entitled to 10 percent of P150 million is viewed by the SEC as tantamount to taking material interest in the assets of ASB and the creditors, and therefore, repugnant to Cruz’s being mere trustee of said properties.

The SEC also discovered that Cruz collected P16 million in cash advances from ASB Group from May 2000 to July 2003 or roughly at the rate of P350,000 per month. Likewise, it found out that Cruz hired professionals like his comptroller, auditors and consultants whose fees were charged against ASB without prior authority from the SEC, contrary to SEC rules.

The cash advances were stopped by SEC and are now being audited.

The ASB Group has knocked on the SEC’s doors for a moratorium on the payment of its over P5 billion in debts to prevent creditors from pursuing foreclosure proceedings against its assets. In its loan payment suspension petition filed with the SEC, ASB cited the sudden pretermination of investments of clients as the reason for its financial woes.